A simple guide to pre-paid funeral plans in 2024

What is a funeral plan?

A pre-paid funeral plan (PPFP) lets you pay for a funeral in advance and at the time of death will pay out an amount defined by the funeral choices stipulated at the time of arrangement.

It is not an investment vehicle and will either pay for the services of your funeral director or can be cancelled and partially refunded, minus administration costs.

Having the peace of mind that the cost of your funeral will be covered by the funeral plan not only removes uncertainties, but also guards against future price rises. The majority of pre-paid funeral plans will guarantee / include the following:

• Funeral plans are usually specific to an individual although some allow you to name two individuals and the plan can be issued for the person who dies first
• The cost of the pre-paid funeral plan is guaranteed, meaning that you are paying at today’s, not tomorrow prices.
• You need to be at least 18 years of age to apply.
• Payment options can vary such as paying a lump sum, paying monthly over 12 months, or over 25 years. With a longer-term plan, you will be charged interest.
• No medical questions apply and there is guaranteed acceptance.
• Funeral plans are exempt from inheritance tax.
• What is included in the plan will vary. Not all costs associated with a funeral are included. Crematorium fees, burial plots, headstones, and embalming usually come as extras so it is worth checking out all the small print in your plan.

The difference between trust based and insurance backed funeral plans

There are two types of PPFP, namely trust based plans and insurance backed plans. In essence they work in the same way, with the difference being the investment vehicle for client funds. In the case of the trust, the funds are placed into a pool and invested for protection and growth as part of a whole portfolio. With insurance backed plans, the funds are used to purchase an individual insurance policy, with the insurance company then investing the funds as they see fit.

The new regulation for pre-paid funeral plans

The pre-paid funeral market was associated with poor standards and in some cases, consumers not receiving the funeral that matched their expectations. Concerns were raised around misrepresented information within the pre-paid funeral plan sector, plus pressurising sales tactics from providers. Therefore, the government introduced a new regulatory framework. Since July 2022, the Financial Conduct Authority (FCA) regulates the funeral plan market. This protects consumers and provides a dispute resolution service if things go wrong.

Things to consider when taking out a pre-paid funeral plan

We would recommend that you ask the following questions before taking out a funeral plan:

• What type of funeral would you like? Would you prefer a cremation, burial, or a funeral without a ceremony such as a direct cremation?
• What is your budget and over what period would you like to pay for your funeral plan?
• What does the funeral plan include and what does it exclude? Are there third-party costs that will be charged for later?
• Can you personalise your funeral plan?
• Are there cancellation charges that apply should you decide you don’t want the plan
• Can you appoint a local funeral director, and can you change funeral director if you choose to, or move area?
• Are there any restrictions on the time and date of a funeral?

Are funeral plans worth it?

Funeral plans can alleviate the emotional and financial burden on your family during an emotional and distressing time. If you have the funds available now and are concerned that they may not be available in your estate at the time of your death, funeral plans can be worth it. They also allow you to state your own funeral wishes which can be extremely comforting to your family when the time comes.

However, in some plans where burial plots are not included, costs can vary dramatically. Location plays a key role in dictating burial plot costs. Sometimes it is more prudent to consider pre-purchasing a plot, which can protect against diminishing space available and the inflation of grave purchase prices.